VAT fraud is a ‘bigger drain on the public purse’ than corporation tax avoidance, says BDO partner
BDO has urged the government to commit greater resources to help HMRC fight VAT carousel fraud.
‘The current UK VAT gap is around £10bn with fraud accounting for approximately one third of this figure,’ the firm said in a press release. ‘If a third of the UK VAT gap is due to fraud, that equates to £3.3bn missing from the public purse every year – equivalent to at least 1p off the effective rate of tax for every UK taxpayer.’
‘The vast proportion of this amount is due to carousel or missing trader fraud,’ said BDO partner Simon Bevan. ‘Politicians and the public at large are presently pointing their finger at various multinationals for allegedly not paying the correct amount of corporation tax. However, our latest survey of UK fraud shows that, in reality, it is the fraud element of UK’s VAT gap … that is the bigger drain on the public purse.’
HMRC said it did not believe VAT fraud had increased.
A spokesman said: ‘HMRC’s latest estimate of the VAT gap shows a decrease from 10.1% in 2010/11 to 9.7% in 2011/12. Prosecutions remain a key part of HMRC’s MTIC [missing trader intra-community fraud] strategy, which also includes a number of civil interventions and legislative responses. Since 2006 the impact of the strategy has seen the estimated losses from the fraud reduce from £3-4bn per year to £0.5-1bn.’
He added: ‘A tax evasion campaign has been launched by HMRC as part of the government’s £917m investment to tackle tax evasion, avoidance and fraud from 2011/12. This has been added to with a further £77m over the next two years as part of December's autumn statement.
‘HMRC is investing in a highly-skilled workforce to combat evasion. We will increase the number of staff working on compliance by around 2,500 people by 2014/15 with an additional 320 criminal investigators and 40 intelligence officers. If people continue to refuse to comply, we will find them and penalise them heavily.’
HMRC estimated the overall tax gap for 2010/11 at £32bn. That figure included VAT of £9.6bn and corporation tax of £4.1bn. However, HMRC’s estimates are necessarily based on current tax law. Campaigners, and a small but growing number of politicians and other commentators, have argued that some multinationals operating within the law do not pay their ‘fair share’ of tax.
‘Top tax cheats’
Last Friday HMRC published photographs of its ‘top tax criminals of 2012’. Thirty-two people were sentenced to a combined total of 155 years and 10 months in prison.
Exchequer secretary David Gauke said: ‘We hope that publishing these pictures will help get across that it always makes sense to declare all your income, and tax dodgers are simply storing up trouble for the future.’
VAT fraud is a ‘bigger drain on the public purse’ than corporation tax avoidance, says BDO partner
BDO has urged the government to commit greater resources to help HMRC fight VAT carousel fraud.
‘The current UK VAT gap is around £10bn with fraud accounting for approximately one third of this figure,’ the firm said in a press release. ‘If a third of the UK VAT gap is due to fraud, that equates to £3.3bn missing from the public purse every year – equivalent to at least 1p off the effective rate of tax for every UK taxpayer.’
‘The vast proportion of this amount is due to carousel or missing trader fraud,’ said BDO partner Simon Bevan. ‘Politicians and the public at large are presently pointing their finger at various multinationals for allegedly not paying the correct amount of corporation tax. However, our latest survey of UK fraud shows that, in reality, it is the fraud element of UK’s VAT gap … that is the bigger drain on the public purse.’
HMRC said it did not believe VAT fraud had increased.
A spokesman said: ‘HMRC’s latest estimate of the VAT gap shows a decrease from 10.1% in 2010/11 to 9.7% in 2011/12. Prosecutions remain a key part of HMRC’s MTIC [missing trader intra-community fraud] strategy, which also includes a number of civil interventions and legislative responses. Since 2006 the impact of the strategy has seen the estimated losses from the fraud reduce from £3-4bn per year to £0.5-1bn.’
He added: ‘A tax evasion campaign has been launched by HMRC as part of the government’s £917m investment to tackle tax evasion, avoidance and fraud from 2011/12. This has been added to with a further £77m over the next two years as part of December's autumn statement.
‘HMRC is investing in a highly-skilled workforce to combat evasion. We will increase the number of staff working on compliance by around 2,500 people by 2014/15 with an additional 320 criminal investigators and 40 intelligence officers. If people continue to refuse to comply, we will find them and penalise them heavily.’
HMRC estimated the overall tax gap for 2010/11 at £32bn. That figure included VAT of £9.6bn and corporation tax of £4.1bn. However, HMRC’s estimates are necessarily based on current tax law. Campaigners, and a small but growing number of politicians and other commentators, have argued that some multinationals operating within the law do not pay their ‘fair share’ of tax.
‘Top tax cheats’
Last Friday HMRC published photographs of its ‘top tax criminals of 2012’. Thirty-two people were sentenced to a combined total of 155 years and 10 months in prison.
Exchequer secretary David Gauke said: ‘We hope that publishing these pictures will help get across that it always makes sense to declare all your income, and tax dodgers are simply storing up trouble for the future.’
